Rural Proofing: a key reference for rural activists and analysts

Rural analysts and activists take note.  Defra has updated its rural proofing guidance this week.  This will be a key reference for anybody interested in the development and impact of policies which affect rural areas.  Why?

Because policy measures are meant to have been ‘rural proofed’.  So the criteria for rural proofing are important because they provide a framework for the independent evaluation of rural impact.  They are also therefore a sound basis on which to challenge measures which may adversely affect rural economic, social and environmental interests, or to promote measures which will support these interests.

The Defra guidance tells us:

Thriving rural communities are vital to the English economy. A fifth of us live in rural areas and they are home to a quarter of England’s businesses, and generate 16.5% of the English economy. Rural areas face particular challenges around distance, sparsity and demography and it is important that government policies consider these properly.
Rural proofing is about understanding the impacts of policies in rural areas. It ensures that these areas receive fair and equitable policy outcomes. This guidance sets out a four- stage process to achieve this objective.

Figure One of the Defra Guidance offers this four stage process for rural-proofing:

Rural Proofing Process

The Guidance goes on to suggest this way to assess rural impact:

Rural Impact How to Assess

Worth a look for anybody concerned with rural policy and development nationally, regionally or locally.

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New Brexit Blog

I have set up a new blog site solely dedicated to Brexit, Farming and the Rural Economy.

You can see it here, and in particular a page of links to useful information which I hope to keep updated with relevant publications and other sources of Brexit information as they appear.

I hope you will find it a useful resource.  Please send in any suggestions for material you think is needed, or other suggestions for its development.

Budget 2017: Rural Round Up

No discernible direct rural points in today’s Budget, but nevertheless there is plenty to think about with the rural implications of the general measures.  In no particular order:

  • The rating announcements are welcome.  A small life belt for the remaining rural pubs with the news that any pub with a rateable value of less than £100,000 will benefit from a £1,000 discount.  Meanwhile businesses which have lost rate relief as a result of the revaluation will see their new rates bill capped at no more than £50 per month.  This is still a notable extra £600 per year which is still likely to be felt in the smallest of businesses to lose relief.  There is also to be a hardship fund of £300 million.
  • The rural self-employed will want to look at the changes to National Insurance contributions which arrive in April 2018.  Class 2 contributions – the weekly ‘stamp’ as it was once known – will be abolished; but Class 4 contributions (based on profits) will go up from 9% to 10%, with a further rise to 11% in April 2019.  Except at the smallest level this will lead to a rise in NICs for most self-employed men and women.
  • Rural skills may benefit from the introduction of T Levels, which will be a new form of technical qualification sitting alongside A Levels (and apprenticeships and .. and ..)
  • The introduction of Digital Tax continues but a small olive branch is the delay in its application to smaller businesses.  At least this gives  a breathing space for smaller rural businesses but will broadband arrive at the far end of the valley in time for online digital tax recording in April 2019?  Perhaps the commitment to spend £16 million on 5G may help, along with the £200 million committed to local broadband.
  • Meanwhile April 2018 becomes the deadline for digital tax for businesses which have profits chargeable to Income Tax, pay Class 4 NI contributions and have a turnover above the VAT threshold – so that’s most farms.
  • April 2019 is the deadline for Income Tax/NI payers who are below the VAT threshold.  It’s also the deadline for any body registered for and paying VAT.
  • April 2020 is the deadline for payers of Corporation Tax (unless presumably already caught by the April 2019 deadline for other VAT payers).
  • Businesses, self-employed and landlords are exempt if turnover is less than £10,000.  Employees with secondary income of more than £10,000 a year from self-employment or property are also caught by the new digital provisions.
  • Digital Tax will therefore be wide ranging and pervasive in its impact, especially for businesses which have maintained traditional records of their income and expenditure.  Preparations will have to be made.
  • Various plans to invest in electric vehicles, robotics and artificial intelligence (£500 million) should feed through to benefits for the agricultural industry, and £300 million to support 1,000 new PhD students in science, technology and engineering subjects may also have agricultural and rural benefits.
  • We are promised various consultations in the year ahead.  The key ones to look out for seem to be:
    • Rent a Room Relief – probably aimed at excluding the AirBnB’ers but could have unintended consequences for those who provide board and lodging for workers for example.
    • Employer provided accommodation – HMRC has undertaken research on this topic recently.
    • Landfill Tax – extending the scope to illegal disposals (not before time but the challenge will be to apprehend the miscreants).
    • Digital Tax Administration (yes, more)
  • We are also promised future calls for evidence in the following areas:
    • Employee business expenses
    • Taxation of benefits in kind
    • Red Diesel – this seems to be aimed more at the use of red diesel in various urban situations, but again beware unintended consequences of anything which might subsequently emerge
  • Insurance Premium  Tax is to rise by another 2% from June 2017.  As any renewal quotation shows this tax is now a significant additional cost.
  • The scope of ‘cash accounting’ for smaller businesses is to be increased, to an ‘entry threshold’ turnover of up to £150,000.  Once in it will be possible to stick with cash accounting up to £300,000.  This could be a useful simplification for some rural businesses, and the government has promised to provide a simple list of disallowed expenditure under the cash basis in this year’s Finance Bill.
  • Unincorporated property businesses will generally be allowed to calculate their taxable profits on a cash basis as well.
  • Meanwhile the tax free allowance for the first £5,000 of dividend income is to be reduced to £2,000.  This allowance is only a year old.  The figures probably equate to tax free dividend income from a shareholding of about £100,000 and £40,000 respectively (that’s assuming a portfolio which is paying 5% net in dividends – many will be much lower).
  • The domicile rules for Inheritance Tax change from this year.  ‘Non doms’ will nevertheless be deemed to be domiciled in the UK for tax purposes where they have been a UK resident for 15 of the past 20 tax years.  Worth looking at for the more international among us.
  • The sweet toothed will pay more for their sugary drinks from April 2018.  A lower rate of 18 ppl will apply to sugary drinks of 5 to 8 g of sugar per 100 ml, and 24ppl above this.  Less demand for sugar?  One for the sugar beet growers?
  • The Aggregates Levy remains frozen at £2/tonne, a rate set in 2009.
  • Technical changes are laid for disposals of land which are subject to Income Tax or Corporation Tax, and the payment deadline for Stamp Duty Land Tax will reduce to 14 days from 30 days in April 2018 (this change was to have been introduced before then).

What have I missed?

Concise Rural Taxation 2017/17 Now Available

Concise Rural Taxation (formerly Taxation for Students of Rural Land Management) is now an annual publication.  This year’s edition is now available. Continue reading “Concise Rural Taxation 2017/17 Now Available”

Brexit and the rural economy

A first reaction to the referendum ‘Brexit’ decision from a group of postgraduate students at Harper Adams University who have been studying Land Use and Management this week.

Project Brexit

The 18 students have worked rapidly in small groups this morning to appraise the impact on different sectors of the rural economy, and the actions that land managers, owners and occupiers should now be considering.  Here they are:

Agriculture: the issues here have been well rehearsed.  What will replace the Common Agricultural Policy?  If anything?  On what terms will we trade with the EU, both for sales of our produce and purchase of our inputs?  Is there an opportunity in this to open or develop new markets at home or abroad?  One paradox is that enhanced regulation of our farming and food industry may add to the quality perception of British food once outside the EU.  But our markets may then be open to genetically-modified crops, and it may be possible to accelerate the uptake of GM technology here.

Scale and efficiency look as if they will become even more important and we might expect to see small farms going to the wall and large farms getting larger.  On the margins some land may switch from sheep production to forestry if there are shortfalls in support.

Knowledge for farming may take a hit: early pest and disease intelligence from continental Europe may become less accessible, and investment in research and development may fall without access to EU funding.  If capital values fall, problems may in turn emerge over borrowing ratios and liquidity.

Labour availability may also limit the production of some higher value crops, even in the short term if seasonal workers choose EU destinations with longer term prospects for free movement of labour.

A wider question over the management of the industry as a whole: will the emphasis on compliance with Basic Payment requirements start to fall away, with what consequences for the wider environment of the countryside?

Land and property: Savills shares saw a 20% drop at one point, wiping £824 million off the value of the company.  House builders fared worse.  This points to a slow down in the rate of house construction, exacerbated by the danger of higher input costs and more difficulty in recruitment given the reliance of construction on EU workers.  This in turn knocks on to the demand for development land, and its price.  Farmers may still be in the market for land if they see bargains available on which they could expand, but foreign buyers are likely to hold off and investment buyers may be far less confident of their own positions given the impact on financial services.  Could this be good news for new entrants?  Even if land prices do drop the prospects of access to land by this route remain unrealistic.  A more likely scenario is for the market to go into virtual stasis, and for prices to do no more than tick over in a narrow price band.  The clear message here: only sell now if you have to.  Rather than sell look at short term options like farm business tenancies.

Forestry: much of the return on investment in forestry comes in the form of capital appreciation.  Will land prices wobble?  A weaker pound could push up the cost of the 60% of our timber we import, in turn pushing up prices to the construction industry while stimulating demand for home grown timber  Good news for foresters could be bad news for processors and end users.  Although the UK Forestry Standard has a EU origin it is now embedded in UK legislation.  The UK however has no planting targets but we do know that there will be severe shortages of home grown timber in 50 or 60 years due to a lack of planting now.  Might changes in agricultural policy lead to the abandonment of marginal land sheep farming, making this ground available for afforestation?  It’s hard to see where planting land may come from otherwise.

Forestry disease and pest control may benefit if plant health import regulations can be imposed rigorously.  But this will require significant expenditure on plant health inspectors.  Will this be a priority for future spending?

Renewables, energy and the environment:  Many of our environmental objectives embody wider obligations than the EU alone, for example our membership of the UN, adoption of the Kyoto protocol and the outcomes of the Paris climate talks.  But without pressure from fellow EU members to achieve the UK target of carbon reduction of 80% against 1990 levels by 2050, will there be sufficient pressure on the government here to make sure we stick to these obligations?

CAP Pillar 2 environmental and rural development schemes are bound to be tied up with whatever happens to domestic agricultural and environmental policy.  The directives on bathing waters and birds and habitat are an EU obligation, but if we stick with the European Economic Area we will still be subject to controls on pollution, industry, energy policy, chemical safety rules and rules on product liability.

The internal energy market in the EU may also become more difficult.  More agreements with specific countries are likely to be needed and the overall effect may be to increase the price of new interconnectors.  Increased investment costs will in turn push energy prices up.  This in turn could foster home production of renewable energy, but companies like Siemens may need to reconsider the use of the UK as a production base for the EU.  The departure of major suppliers could in turn lead to price rises on kit putting further pressure on energy prices.

So: one door has closed firmly and for good.  Who knows where the other doors are or what lies behind them?  The outlook is still very substantially speculative beyond the short-term market reactions.  The future belongs to those who will be the most vigilant and opportunistic.

Measure for Measure

Philip Meade has published a post on his Dispute Resolution blog which serves as an excellent reminder of some of the good practice surveying basics: points which are just as useful to a trainee or newly-qualified surveyor as they are to an experienced arbitrator.  I’m delighted to reproduce it below:

Despite our professional roots in land surveying it is not uncommon as an arbitrator to come across valuation disputes in which the precise location and extent of the original problem is far from c…

Source: Measure for Measure

Budget 2016: Rural and property points

Headline points from the 2016 Budget for the rural economy and property. Get out of sugar, get into tunnelling, run a micro-business on the side, infrastructure needs you, take your capital gains now, incorporation is looking better and better unless you intend to sell your professional services to the public sector, drink whisky and beer not wine. Despite this, old age and death are beginning to look expensive.

A £3.5 bn reduction in public expenditure is not intended to dent George Osborne’s claim that, “We [ie the Conservative Government] are the builders”. Practically this means Continue reading “Budget 2016: Rural and property points”